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CAP Reform

Dairy industry favours intervention purchasing system as part of an effective and cost neutral safety net.

In view of the current ‘trilogue’ discussions, the European dairy industry puts forward an effective safety net as an alternative to any form of supply management. This safety net should primarily operate through an intervention purchasing system, which has already proved itself to be effective and cost neutral to the EU budget in the past. EDA urges therefore the negotiators in the trilogue to make the appropriate modifications to the safety net to make this a viable measure against extreme price volatility.

On several occasions, the European Dairy Association (EDA) has voiced serious concerns about proposals for supply management in times of crisis by the EU in the dairy sector. The European dairy industry is not in favour of such measures for a number of reasons: first of all, it will not result in the desired price effect and second, it would primarily assist other, non-European, countries to profit from the growth in world market demand. There are also important concerns with regards to the efficiency, competitiveness, investment, budget, timeliness and administration of such a system.

Yet freely operating markets are inherently volatile, and can cause needless destruction to productive potential.

As there are no valuable private sector solutions in place yet, the EU should play a continued role in market management until these solutions become available. EDA is of the opinion that the provision of an effective safety net, primarily through the operation of an intervention purchasing system, would be a more effective means of addressing price volatility than supply management. Intervention purchasing has proven to be effective in 2009 in placing a floor in the market. It has also shown itself to be cost neutral to the EU budget.

Concretely, the European dairy industry is asking policy makers to, as a part of the CAP reform, expand and modify rules governing the use of intervention to:

  • Ensure that support prices can be adjusted to take into account relevant factors
  • Reassure the market that intervention will not be exploited to create artificially high support prices.

This system would not prejudice the ability of the Commission to take action in response to emergency situations. Also, an appropriate intervention support price for the future would need to be determined by the Commission via exhaustive econometric analysis.

“We feel that supporting and strengthening the safety net will equip the EU with a cost effective instrument for addressing price volatility whilst still giving all stakeholders confidence to expand and take advantage of the growing global demand for high quality dairy products,” concludes Joop Kleibeuker, Secretary-General of EDA.

 

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